July 17, 2014

If You've Got a Small Business, Odds Are the Export-Import Bank Isn't Helping You

Veronique de Rugy

George Gibbs Chair in Political Economy

Americans now know the Export-Import Bank is a corporatist program built on bad economics. Its corporate beneficiaries are fighting tooth and nail to protect their subsidies. Do not be fooled by their rhetoric.

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Americans now know the Export-Import Bank is a corporatist program built on bad economics.

Its corporate beneficiaries are fighting tooth and nail to protect their subsidies. Do not be fooled by their rhetoric.

Insider lobbying groups like the Chamber of Commerce claim the Ex-Im Bank is about small business and jobs. Without the bank, they threaten, catastrophe will strike average Americans.

This is just fear-mongering. The bank only subsidizes less than 2 percent of exports and jobs and less than 1 percent of small businesses in the U.S. each year. Most of this support directly benefits a handful of well-connected domestic and foreign firms, like Boeing and General Electric.

Unfortunately, Ex-Im supporters know that “promoting small business” is a good way to conceal toxic Ex-Im corporatism.

Take this piece in The Hill by Rep. Charles Boustany Jr., R-La. He argues that the bank primarily helps small businesses to gain customers, create thousands of jobs, and grow exports. These claims are misleading.

First, the Ex-Im Bank's definition of a “small business” isn't exactly “small.” Most government bodies set the threshold at firms with fewer than 500 employees. Ex-Im “small businesses” can be three times that large and earn up to $21 million in annual revenues. This isn't “small” for most Americans.

Even with this expansive definition, it is misleading to imply, as Boustany does, that Ex-Im supports most small business firms and jobs in America. In fact, Ex-Im's effect on U.S. small businesses and jobs is so tiny that you can hardly see it on the chart above.

Data from Census Bureau's Statistics of U.S. Businesses dataset and this Export-Import Bank dataset show that only 0.3 percent of all small business jobs in 2007 (the most recent year for the Census dataset) were supported by the Ex-Im Bank. Assuming that each Ex-Im small business transaction went to a unique small business, only 0.04 percent of all small businesses were supported by Ex-Im that year.

The pattern is similar on the state level. Consider Boustany's home state of Louisiana. Census data show that Louisiana exported $355 billion in goods and services from 2007 to 2014. Ex-Im reports that it supported $1.6 million of Louisiana's exports in that same time, $786 million of which went to small businesses.

This means that only 0.44 percent of Louisiana’s exports were actually supported by the bank — which is lower than the national average of 1.6 percent. Additionally, Ex-Im only supported 0.22 percent in exports for small businesses in Louisiana.

Boustany either doesn’t know the facts or he doesn’t care. Either way: Ex-Im is hardly critical for more than 99 percent of small businesses in the U.S. and his own state. That doesn’t stop Boustany from trying to scare Americans from ending the Export-Import Bank with visions of exports collapsing and economic catastrophe.

The sad part is that the Export-Import Bank actually harms many U.S. small businesses and workers by subsidizing their competitors. Boustany doesn’t explain that when Ex-Im subsidizes one Louisiana firm, it penalizes all other unsubsidized firms and workers. Subsidized firms undoubtedly enjoy that these taxpayer-backed subsidies lower their costs and raise their profits, but they come at the cost of slower wage growth, less hiring, and more layoffs among the other 98 percent of unsubsidized exports. These unsubsidized Americans shouldn’t matter less than the few privileged firms who receive government subsidies.

Boustany is right when he says that “American people are tired of Washington politicians playing political games when American jobs are at stake.” He should look in the mirror. More than 98 percent of jobs and exports in the U.S. bear the unjust costs of Ex-Im privileges for politically connected few.

Members of Congress should represent all of us, not just those of us fortunate to have friends down at the Export-Import Bank.